Home Prices Rose 8.3% In 2013, Biggest Jump Since 2005

March 11, 2014|By KENNETH R. GOSSELIN, kgosselin@courant.com

Home sale prices in Connecticut last year registered their biggestgains in nearly a decade, the strongest sign yet that the state's housing market is emerging fromitsprolonged downturn, a report released Tuesday shows.

And experts say that could bode well for the coming spring home-buying season.

The median sale price of a single-family house statewide rose 8.3 percent, from $240,000 in 2012 to $259,000 in 2013, The Warren Group, which tracks real estate trends in New England, reported Tuesday.

The jump in prices caught some by surprise, and some suggested that price increases in one part of the state may have influenced the overall gain. For instance, prices jumped 15 percent in Litchfield County.

"It seems a little strong," said Donald L. Klepper-Smith, an economist at DataCore Partners Inc. "I would have expected something in the 3 to 5 percent range."

But, he added: "Fundamentally, the housing market is healing."

There were wide differences in median sale price gains across the state's eight counties, ranging from a 2.3 percent increase in Tolland County to a 15 percent gain in Litchfield County. Only New London County saw a decline, down 1 percent.

In Hartford County, the median sale price — where half the sales are above, half below — gained 3.5 percent, rising to $221,500 in 2013, compared with $214,000 in 2012. Sales rose 6 percent in the same period, Warren Group reported.

Tuesday's report reflects sale prices and is not a measure of all home values. It also doesn't acknowledge that some homes may be selling for less than the original asking price. And the median sale price can be influenced by the mix of houses that are sold.

The median price increase statewide was the strongest since 2005. when prices rose nearly 11 percent on a year-over-year basis. Since then, the next highest bump up was nearly 4 percent in 2010, spurred partly by a federal home-buyer tax credit.

In 2012, the number ofsales increased but prices continued to decline, though only modestly, by just a little over 1 percent.

Timothy M. Warren Jr., chief executive of The Warren Group, said that in a recovery, sale price gains typically follow an uptick in the number ofsales.

"It takes awhile for prices to reflect that the market is turning," Warren said.

Warren said he expects Connecticut's housing market to continue to make strides in 2014, given thatonly25,000 single-family houses changed ownership last year. A healthy market would see transactions closer to 40,000 a year, he said.

"That's 15,000 homes in a good year that didn't sell," Warren said. "I take that as an indicator of pent-up demand."

Warren said the slow pace of job growth in Connecticut remains a concern. In 2013, job growth in the state was half of what it was before the recession hit, preliminary statistics show.

Big purchases such as a new home are tied largely to buyers' comfort with job security or confidence that they can find other work should they lose their job.

Rising mortgage rates also could crimp sales, and home loan underwriting remains strict, except for borrowers with the best credit histories.

Real estate agents say the bulk of the gains in 2013 came during the spring home-buying season, typically the busiest of the year.

Paula Fahy Ostop, an agent at William Raveis in West Hartford, said she expects healthy activity this spring, though she said it is a little early to predict just how much of a bump it will give the market.

Ostop said conditions are favorable: Inventory remains relatively low, and there are plenty of buyers in the market. Activity is slow at the high end of the market, but demand is steady for houses in the $400,000 range.

And even with the cold, snowy winter, Ostop said, "people have been reporting a lot of activity at open houses."